1 / 18

Nash Equilibrium

Nash Equilibrium. Modeling an Industry. Competitive Industry – Many Firms Monopoly – One Firm Duopoly (Oligopoly) – A Few Firms. Modeling an Industry. Competitive Industry – Many Firms Monopoly – One Firm Duopoly (Oligopoly) – A Few Firms Cournot Bertrand

elinor
Download Presentation

Nash Equilibrium

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Nash Equilibrium Lectures in Microeconomics-Charles W. Upton

  2. Modeling an Industry • Competitive Industry – Many Firms • Monopoly – One Firm • Duopoly (Oligopoly) – A Few Firms Nash Equilibrium

  3. Modeling an Industry • Competitive Industry – Many Firms • Monopoly – One Firm • Duopoly (Oligopoly) – A Few Firms • Cournot • Bertrand • Might there be other approaches? Nash Equilibrium

  4. Different Problems • A can build an expensive or cheap car. • B can build an expensive or cheap car. • There are four possible outcomes (E,E), (E,C), (C,E), (C,C) • What will happen? Nash Equilibrium

  5. Different Problems • Firm A can build an expensive or a cheap car. • Firm B can build an expensive of cheap car. • There are four possible outcomes (E,E), (E,C), (C,E), (C,C) • What will happen? Which, if any of those outcomes is a Nash Equilibrium? Nash Equilibrium

  6. Firms must end up at a Nash Equilibrium, named after John Nash A Nash Equilibrium Each person or firm is acting rationally Nash Equilibrium Nash Equilibrium

  7. A Nash Equilibrium • Each person or firm is acting rationally • No one believes his actions will change other decisions Nash Equilibrium

  8. A Nash Equilibrium • Each person or firm is acting rationally • No one believes his actions will change other decisions • No one has an incentive to change Nash Equilibrium

  9. Cournot qA = 45 – (1/2)qB qB = 45 – (1/2)qA Nash Equilibrium

  10. Cournot qA = 45 – (1/2)qB qB = 45 – (1/2)qA Does the Cournot model predict we will end up at a Nash Equilibrium? Yes Nash Equilibrium

  11. Cournot qA = 45 – (1/2)qB qB = 45 – (1/2)qA • Each person or firm is acting rationally • No one believes his actions will change other decisions • No one has an incentive to change Nash Equilibrium

  12. Demand function is as shown. Firm with lowest bid gets all the market. In case of tie, firms split market MC = 0 The Bertrand Model Does the Bertrand Model predict we will end up at a Nash Equilibrium? Yes D Nash Equilibrium

  13. Demand function is as shown. Firm with lowest bid gets all the market. In case of tie, firms split market MC = 0 The Bertrand Model • Each person or firm is acting rationally • No one believes his actions will change other decisions • No one has an incentive to change D Nash Equilibrium

  14. Some Questions about Nash Equilibrium • Nash Equilibrium is useful for studying problems where there are just a couple of players. Nash Equilibrium

  15. This slide left blank Nash Equilibrium

  16. Nash and Duopolies • Does there have to be a Nash Equilibrium? No Nash Equilibrium

  17. Nash and Duopolies • Does there have to be a Nash Equilibrium? • Does there have to be only one Nash Equilibrium? No Nash Equilibrium

  18. End ©2003 Charles W. Upton Nash Equilibrium

More Related